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Blockchain-based eSDR to address liquidity shortage in 2017

Yao Yudong, ex-director of PBOC Research Institute, delivered a keynote speech in the 2016 China Shenzhen Fintech Summit, proposing an electronic Special Drawing Rights (eSDR) system based on blockchain technology to mitigate the liquidity shortage problem in 2017. His speech was titled: To issue eSDR to build a new type of super-sovereign cross-border payment settlement system.

Yao Yudong ex-director of PBOC Research Institute

A Global Central Bank with eSDR as universal currency
Yao explained the idea of eSDR and its issuance mechanism:

Under the joint efforts of the IMF and the member states, we can explores the prototype of the “global central bank” mechanism and attempts to innovate a digital monetary system, namely eSDR.
First of all, the decentralized issuance of eSDR is pegged with global economic growth and inflation level. the realization of which depends on algorithm, spontaneous running of nodes and terminals. The supply of eSDR is constrained by international rules.

Support of this comes from the IMF Charter Article 18:Allocation and Cancellation of Special Drawing Rights

Section 1. Principles and considerations governing allocation and cancellation
(a) In all its decisions with respect to the allocation and cancellation of special drawing rights the Fund shall seek to meet the long-term global need, as and when it arises, to supplement existing reserve assets in such manner as will promote the attainment of its purposes and will avoid economic stagnation and deflation as well as excess demand and inflation in the world.
Secondly, to build an international currency credit consensus mechanism via an open and transparent rules for smart currency.
Thirdly, the system shall be maintained by the various participants. Financial institutions, central banks, even non-financial enterprises and residents can be gradually incorporated into the system.

Obviously, the support of eSDR is to foster an opponent against US dollars, or at least weaken its influence.
According to the IMF, the creation and universal distribution of SDR is based on complementing the long-term global needs. Historically, there are only 3 allocation of SDR. The first allocation or 9.3 billion SDR was appropriated in 1970-1972. The second allocation or 12.1 billion SDR was appropriated in 1979-1981. The third one or 161.2 billion SDR was carried out in August 2009. It’s worth noting that the 2009 distribution played a key role in providing liquidity to the global economic system and complementing the official reserves of member countries during the global financial crisis.

He also voiced his concern for 2017:

With the end of QE by Japan Central Bank and European Central Bank in 2017, the global liquidity shortage may become a pressing issue. It’s worth trying to issue eSDR to supplement the global liquidity deficiency. As SDR do not enter the market circulation, the exchange rate is not credible. Compared with the SDR, eSDR should try to extend applications beyond the reserve function, like payment, financial transactions pricing. For example, some particular countries may be allowed to issue eSDR-denominated bonds.

The Research Institute of PBOC is a bureau-level research institution under the direct leadership of the head office of the People’s Bank of China. It mainly focus on the research of monetary policy theory, financial and economic development strategy and financial science, providing theoretical basis and research materials for the head office to formulate monetary policy, offering reference for decision-making and financial system reform.
Basically, it’s the brain of PBOC.
It’s not the first time that Yao proposed the idea of eSDR. He mentioned it via an op-ed article last November.

Why do Chinese Authority Support SDR?
On 7th November, the PBOC data indicates that China’s foreign exchange reserves dropped 45.727 billion US dollars in October to 3.1207 trillion US dollars, the lowest since the end of 2011. The tricky part is that if measured by SDR, the foreign currency reserve of China increases 2.984 billion SDR to 2,271469 trillion SDR in October.

“The People’s Bank of China has chosen to release foreign exchange reserve data denominated in US dollars and SDRs simultaneously for two reaons. The first is to eliminate the international community’s misunderstanding of China’s foreign exchange reserves and the drastic fall of the RMB exchange rate; on the other hand, it hopes to weaken the dominant position of USD in order to reduce its influence to the international financial markets.”

Then he elaborates the advantage of blockchain-based eSDR:

Blockchain-based eSDR has three major advantages: First of all, the fluctuation-proof feature of SDR remains unchanged. Countries that adopts SDR as the primary settlement means instead of USD may dodge the risk like exchange rate fluctuations, credit crisis, devaluation crisis and the risk arising from the US’s attempt to shift financial crisis. Secondly, eSDR based on the blockchain technology provides a strong support of trust with the “decentralized authentication mechanism”, which requires no union to guarantee its immutability. Thirdly, the eSDR can be decentralized so that the payer and the payee can trade directly on peer-to-peer financial networks, excluding third-party interventions and blockages.

He is also of the opinion that RMB will become a international safe-haven currency in the future.

Bitcoin dilemma
At the end of the speech, Yao also pointed the dilemma of Bitcoin:

According to our common research, the dilemma of digital currency – Bitcoin is being stashed, rather than being traded. If no one use the digital currency, its value is low. If too many people use it, the price will rise. People will expect the price to rise and store them. If I pay you one Bitcoin, who else is going to pay me one Bitcoin?

To summarize, the PBOC is exploring a global currency based on blockchain technology to weaken the status of US dollars. Such system could be backed by member countries. Bitcoin is trapped by its own dilemma and therefore not important.

It is a long way to go before the eSDR alliance could be formed before major hurdles like agreement on creation and allocation of eSDR are overcame. But Chinese are fast to learn and adopt. Shenzhen plans to the first city in China to embrace digital currency.

Learn cryptocurrency and digital assets since 2013 and co-founder of 8btc in 2014. Co-author of 2014-2015 Digital Currency Development Report(2015) and first author of Investment Guidelines To Blockchain Digital Currency (Published in June 2017 ISBN:9787300239286).

COMMENTS(15)

2 years agohl5460

Yao Yudong, ex-director of PBOC Research Institute, delivered a keynote speech in the 2016 China Shenzhen Fintech Summit, proposing an electronic Special Drawing Rights (eSDR) system based on blockchain technology to mitigate the liquidity shortage problem in 2017. His speech was titled: To issue eSDR to build a new type of super-sovereign cross-border payment settlement system.http://news.8btc.com/blockchain-based-esdr-to-address-liquidity-shortage-in-2017

That is actually a good idea but we all know that allied countries will not favor that. The United States of America will be the number one to go against that. They will not allow that the US dollars will not be on top and they will do anything just to stay at the top of the financial and economic system. I am not very sure how does the system you mentioned works since the link that you gave cannot be opened, hope I can read it to give sufficient and knowledge based opinion on this matter.

Quote from: hl5460 on December 29, 2016, 01:53:31 AM
Yao Yudong, ex-director of PBOC Research Institute, delivered a keynote speech in the 2016 China Shenzhen Fintech Summit, proposing an electronic Special Drawing Rights (eSDR) system based on blockchain technology to mitigate the liquidity shortage problem in 2017. His speech was titled: To issue eSDR to build a new type of super-sovereign cross-border payment settlement system.http://news.8btc.com/blockchain-based-esdr-to-address-liquidity-shortage-in-2017

Well, it would be much easier for them to just use Bitcoin for all international payments. But as always, statists need to prove their relevance… Actually, if the central banks of BRICS would buy Bitcoin and promote its use for national and international trade, the dominance of the USD would vanish in no time. Because of the first-mover advantage and the resulting increase in BTC value such a move would be highly beneficial for them. Not mentioning the possible savings by ceasing the issuance of national currencies…ya.ya.yo!

Quote from: yayayo on December 29, 2016, 03:32:27 PM
Well, it would be much easier for them to just use Bitcoin for all international payments. But as always, statists need to prove their relevance… Actually, if the central banks of BRICS would buy Bitcoin and promote its use for national and international trade, the dominance of the USD would vanish in no time. Because of the first-mover advantage and the resulting increase in BTC value such a move would be highly beneficial for them. Not mentioning the possible savings by ceasing the issuance of national currencies…ya.ya.yo!

you have to accept that banks are not going to move over to bitcoin.but what you should also accept is that bitcoin SHOULD NOT move over to banks.bitcoin should remain open and borderless as a free choice against the bankers.but it seems all your rhetoric is about a fiat valuation so you can run back to fiat one day.

Quote from: yayayo on December 29, 2016, 03:32:27 PM
Well, it would be much easier for them to just use Bitcoin for all international payments. But as always, statists need to prove their relevance… Actually, if the central banks of BRICS would buy Bitcoin and promote its use for national and international trade, the dominance of the USD would vanish in no time. Because of the first-mover advantage and the resulting increase in BTC value such a move would be highly beneficial for them. Not mentioning the possible savings by ceasing the issuance of national currencies…ya.ya.yo!

you have to accept that banks are not going to move over to bitcoin.but what you should also accept is that bitcoin SHOULD NOT move over to banks.bitcoin should remain open and borderless as a free choice against the bankers.but it seems all your rhetoric is about a fiat valuation so you can run back to fiat one day.

Hey franky, how’s UnlimitedCoin doing? It’s always funny to read your attempts to misinterpret and contort statements and facts. You definitely have some talent here (Roger Ver will certainly be proud of you).As always: None of your conclusions is correct. I neither hope for banks to move over to Bitcoin, nor do I hope that Bitcoin should move over to banks. In fact I’m extremely anti-fiat. It’s impossible that you are unaware of this, because I frequently criticize for-fiat-traders and (affiliates of) bankers.ya.ya.yo!

Quote from: yayayo on December 29, 2016, 03:32:27 PM
Well, it would be much easier for them to just use Bitcoin for all international payments. But as always, statists need to prove their relevance… Actually, if the central banks of BRICS would buy Bitcoin and promote its use for national and international trade, the dominance of the USD would vanish in no time. Because of the first-mover advantage and the resulting increase in BTC value such a move would be highly beneficial for them. Not mentioning the possible savings by ceasing the issuance of national currencies…ya.ya.yo!

you have to accept that banks are not going to move over to bitcoin.but what you should also accept is that bitcoin SHOULD NOT move over to banks.bitcoin should remain open and borderless as a free choice against the bankers.but it seems all your rhetoric is about a fiat valuation so you can run back to fiat one day.

Hey franky, how’s UnlimitedCoin doing? It’s always funny to read your attempts to misinterpret and contort statements and facts. You definitely have some talent here (Roger Ver will certainly be proud of you).As always: None of your conclusions is correct. I neither hope for banks to move over to Bitcoin, nor do I hope that Bitcoin should move over to banks. In fact I’m extremely anti-fiat. It’s impossible that you are unaware of this, because I frequently criticize for-fiat-traders and (affiliates of) bankers.ya.ya.yo!

your obsession about btc value entertains me.. exactly how do you define value.. oh wait. your going to tell me a surge in the.. ‘dollar’ value..lolthe funny part is i have never ever seen you talking about cost of living, or any other measure thats not dollar derived.but i have seen you many times want bitcoin to be centralised, commercialised and government/bank accepted to cause a fiat rise so you can make fiat profit when you exit bitcoin.

your obsession about btc value entertains me.. exactly how do you define value.. oh wait. your going to tell me a surge in the.. ‘dollar’ value..lolthe funny part is i have never ever seen you talking about cost of living, or any other measure thats not dollar derived.but i have seen you many times want bitcoin to be centralised, commercialised and government/bank accepted to cause a fiat rise so you can make fiat profit when you exit bitcoin.

Again, the exact opposite is true. I’ve made multiple posts about inflation related topics and criticized other users for being attached to fiat money. I’m frequently talking about precious metals as well.Franky, you have proven to be a truly professional troll.Welcome to my ignore list.I think you deserve negative feedback for defamation as well. But I have to think about this a bit more, because there’s a high probability that your sick mind would interpret negative feedback as acclamation… ya.ya.yo!

your obsession about btc value entertains me.. exactly how do you define value.. oh wait. your going to tell me a surge in the.. ‘dollar’ value..lolthe funny part is i have never ever seen you talking about cost of living, or any other measure thats not dollar derived.but i have seen you many times want bitcoin to be centralised, commercialised and government/bank accepted to cause a fiat rise so you can make fiat profit when you exit bitcoin.

Again, the exact opposite is true. I’ve made multiple posts about inflation related topics and criticized other users for being attached to fiat money. I’m frequently talking about precious metals as well.Franky, you have proven to be a truly professional troll.Welcome to my ignore list.I think you deserve negative feedback for defamation as well. But I have to think about this a bit more, because there’s a high probability that you’re sick mind would interpret negative feedback as acclamation… ya.ya.yo!

defamation?firstly there is no person with a birth certificate of yayaya to be defamedsecondly you have no reputation to taint. your pseudonym has tainted its own reputation oftenthirdly it would be more wise you do some research and have an independent thought now and again because most of your rhetoric sounds like your just spoonfed by blockstreamersfourthly the more people that you ignore for having an independent mindset, will just leave you only talking to blockstreamers and just circle jerking the same false ideologies thinking your correct because your circle jerking club all are spoonfed from the same bowl.but have a nice day

Quote from: leopard2 on December 29, 2016, 04:45:18 PM
I have suggested such a thing years ago; but why reinvent the wheel?–>it exists already, it is called “Bitcoin”

the PBOC are government banks.. bitcoin should stay well clear from themgovernments want taxes and banks want fee’s and debt to then charge more fees onbitcoin should stay well clear from that.however normal people.. the 7 billion people not working in a government position of power should have the freedom to use any currency they please.if this means bitcoin then great.let the commercial banks dry up and drop out. let the governments sack their leather seat lobbyists and lucratively paid expenses syphoning bureaucrats. so that any government taxes go back to a lean and clean public service allocation, once they have killed off the dead weight in response to a drop in tax income due to non national trade.but lets not let governments/banks become the international holders of the IMF super power LN hub. dominating and hoarding all the coins.keep bitcoin open and free of control, and leave governments to do their thing

Quote from: Xester on December 29, 2016, 03:10:46 AM
That is actually a good idea but we all know that allied countries will not favor that. The United States of America will be the number one to go against that. They will not allow that the US dollars will not be on top and they will do anything just to stay at the top of the financial and economic system. I am not very sure how does the system you mentioned works since the link that you gave cannot be opened, hope I can read it to give sufficient and knowledge based opinion on this matter.

part of loosening the grip of the dollar is by china being part of BRIC’s* where several countries join together to have their own pricing arrangement away from the dollar*BrazilRussiaIndiaChinaofcourse the IMF are still top of the financial pyramid but it has become widely known that the IMF is moving away from the dollar as the dollar is losing power.as for blockchain based info.. this will be part of hyperledger. and not related to using bitcoinas for america’s reaction..well forget syria, forget russia.. trump is obviously got his sights set on china.. just look at his pre election speaches and obsession about the word china.look at the american ‘patriots’ on this forum who are obvious trump supports shouting and crying about china’s dominance of bitcoin.its obvious the propaganda machine of fox news will start pushing for support to go to war with china for any little reason they can findin the early 2000’s america got saudi arabia onboard. they are now getting russia onboard (yea forget the fox news spit for spat against russia), america loves russia and gives them billions to help nasa..whats gonna happen next is after the saudi landgrab of UAE, syria, lybia is over.. america along with their new allies and this will include australia. uk france saudi, etc will start in the mongolia region of china and then move east while also attacking from the oceans on the east heading west to flank on both fronts.